Correlation Between Xtrackers ShortDAX and PNC Financial

Can any of the company-specific risk be diversified away by investing in both Xtrackers ShortDAX and PNC Financial at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Xtrackers ShortDAX and PNC Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xtrackers ShortDAX and The PNC Financial, you can compare the effects of market volatilities on Xtrackers ShortDAX and PNC Financial and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Xtrackers ShortDAX with a short position of PNC Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers ShortDAX and PNC Financial.

Diversification Opportunities for Xtrackers ShortDAX and PNC Financial

-0.34

Correlation Coefficient

Xtrackers ShortDAX  PNC Financial

Very good diversification

The 3 months correlation between Xtrackers and PNC is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers ShortDAX and The PNC Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PNC Financial and Xtrackers ShortDAX is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Xtrackers ShortDAX are associated (or correlated) with PNC Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PNC Financial has no effect on the direction of Xtrackers ShortDAX i.e., Xtrackers ShortDAX and PNC Financial go up and down completely randomly.

Pair Corralation between Xtrackers ShortDAX and PNC Financial

Assuming the 90 days trading horizon Xtrackers ShortDAX is expected to under-perform the PNC Financial. But the etf apears to be less risky and, when comparing its historical volatility, Xtrackers ShortDAX is 1.08 times less risky than PNC Financial. The etf trades about -0.03 of its potential returns per unit of risk. The The PNC Financial is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  16,349  in The PNC Financial on August 31, 2024 and sell it today you would earn a total of  4,051  from holding The PNC Financial or generate 24.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Xtrackers ShortDAX  vs.  The PNC Financial

Xtrackers ShortDAX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers ShortDAX has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Xtrackers ShortDAX is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

PNC Financial

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The PNC Financial are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PNC Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xtrackers ShortDAX and PNC Financial

The main advantage of trading using opposite Xtrackers ShortDAX and PNC Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers ShortDAX position performs unexpectedly, PNC Financial can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in PNC Financial will offset losses from the drop in PNC Financial's long position.

The idea behind Xtrackers ShortDAX and The PNC Financial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.